RODINE v. WILLIAMS COMPANIES, INC. (D.Neb. 2004)

LAURIE SMITH CAMP, District Judge

This matter is before the Court on Colbent Management Corporation's ("Colbent's") Motion to Dismiss (Filing No. 46). Colbent moves to dismiss the Third Party Complaint of Defendant EquiServe Trust Co., N.A. ("EquiServe") (Filing No. 24) and the Third Party Complaint of The William Companies, Inc. ("Williams") and Resources Acquisition Corp. ("Resources Acquisition") (Filing No. 30). The Motion to Dismiss is supported by a brief (Filing No. 47), an Index of Evidence (Filing No. 48), and a reply brief (Filing No. 67). EquiServe has submitted a brief (Filing No. 58), an Amended Index of Evidence (Filing No. 60), and an Affidavit (Filing No. 68) in opposition to the motion. Williams and Resources Acquisition have submitted a brief (Filing No. 57), an Index of Evidence (Filing No. 61), and additional evidence (Filing No. 66) in opposition to Colbent's motion. The central issue before this Court is whether it has personal jurisdiction over Colbent, the Third Party Defendant.

The facts alleged in the Complaint are accepted as true for purposes of the Court's analysis of Colbent's Motion to Dismiss, except to the extent that those facts are contradicted by allegations in the Third Party Complaints. The Court will construe the facts from the pleadings and affidavits in the light most favorable to the Third Party Plaintiffs, resolving all factual conflicts in their favor. Pecoraro v. Sky Ranch for Boys, Inc., 340 F.3d 558, 561 (8th Cir. 2003).

The Complaint

On May 14, 2001, Williams, through its wholly-owned subsidiary Resources Acquisition, made a tender offer to the stockholders of Barrett Resources Corporation ("Barrett"). (Filing No. 1, ¶ 6.) Iola G. Rodine, Trustee of the Iola G. Rodine Revocable Trust ("Rodine"), owned 1,358 shares of Barrett stock on the date of the tender offer. ( Id., ¶ 7.) The terms and conditions of the offer are set forth in a document entitled "Offer to Purchase for Cash." (Filing No. 1, ¶ 6.) The tender offer was to expire at 12:00 midnight, eastern time, on June 11, 2001, unless extended. The offer identified EquiServe as the depositary for the tender offer. ( Id., ¶ 9; Filing No. 68 (Aff. of Keith Menslage), Ex. 1.) Enclosed with the offer was a letter of transmittal, which was to be completed and delivered to EquiServe, together with share certificates and any other required documents, prior to the expiration of the offer. (Filing No. 1, ¶ 11.) On or about June 8, 2001, Rodine accepted the offer by mailing her share certificate and completed and executed letter of transmittal to EquiServe via overnight delivery. ( Id., ¶ 12.) Rodine's mailing was timely delivered to the address designated in the tender offer. ( Id., ¶ 13.) Rodine asserts that because at least 16,730,502 shares of Barrett stock were validly tendered in a timely and complete manner, Williams and Resources Acquisition were bound to accept her Barrett stock on a pro rata basis under the terms of the tender offer, based on a purchase price of $73.00 for 16,730,502 shares. ( Id., ¶ 14.)

Rodine contends that on or about July 29, 2001, EquiServe returned Rodine's completed Letter of Transmittal, falsely stating that the Letter of Transmittal and/or share certificate were received after the expiration date of the tender offer. ( Id., ¶ 15.) EquiServe, alleges, however, that it did not generate that letter to Rodine, and that the letter (actually dated June 29, 2001) must have been generated and sent by Colbent. (Filing No. 24, ¶ 14; Filing No. 60, Attachment 1, Ex. 1). Williams and Resources Acquisition adopt this presumption in their Third Party Complaint. (Filing No. 30, ¶ 14). Rodine alleges that Williams, Resources Acquisition, and EquiServe failed and refused to pay her for her shares pursuant to the terms of the tender offer, and did not return her share certificate. (Filing No. 1, ¶¶ 16-17.)

After the expiration date of the tender offer, Williams and Resources Acquisition, or their agents, sent a second letter of transmittal to Rodine. ( Id., ¶ 18.) Pursuant to the second letter, after the pro rata purchase of 16,730,502 shares of Barrett stock, Williams and Resources Acquisition agreed to exchange each remaining Barrett share for 1.767 shares of common stock of Williams, and to issue a check for payment in lieu of issuance of fractional shares of Williams. ( Id., ¶ 19.) Williams' stock was valued at $33.80 on the closing date of the merger of Williams and Barrett. ( Id., ¶ 20.) Stockholders, including Rodine, wishing to exchange their remaining shares pursuant to the second letter of transmittal were required to deliver the second letter and the certificates representing remaining Barrett shares to EquiServe, the exchange agent. ( Id., ¶ 21.) Rodine alleges that she was unable to participate in this exchange because the Defendants did not return her certificate or any certificate for the remaining shares of Barrett stock she should have owned after the initial pro rata purchase. ( Id., ¶ 22.)

Rodine brings the following causes of action against Williams and Resources Acquisition: 1) a violation of Rule 14e-1(c), promulgated under Section 14 of the Securities Exchange Act of 1934, for failing to pay the consideration offered or return the securities deposited promptly after the termination or withdrawal of a tender offer; and 2) breach of contract. Rodine asserts the following causes of action against EquiServe: 1) a violation of Rule 14e-1(c), alleging that EquiServe assisted Williams and Resources Acquisition in failing to pay Rodine for her shares or return her share certificate promptly after the termination of the tender offer; 2) negligence; 3) breach of fiduciary duty; and 4) breach of contract.

The Third Party Complaints

In the Third Party Complaints, EquiServe, Williams, and Resources Acquisition allege that EquiServe was authorized to subcontract for systems, processing, telephone and mailing services in connection with the tender offer. (Filing No. 24, ¶ 6; Filing No. 30, ¶ 6.) Accordingly, EquiServe and the Third Party Defendant, Colbent Management Corporation ("Colbent"), entered into such an agreement. (Filing No. 24, ¶ 7; Filing No. 30, ¶ 7.) Under this agreement, EquiServe subcontracted with Colbent for the processing of documents submitted by Barrett stockholders under the tender offer. (Filing No. 24, ¶ 9; Filing No. 30, ¶ 9.)

According to the Third Party Complaints, when Rodine alleges that she delivered her share certificate to EquiServe, the certificate was actually in the custody and under the control of Colbent. (Filing No. 24 ¶¶ 12-13; Filing No. 30 ¶¶ 12-13.) EquiServe, Williams, and Resources Acquisition allege that, if Rodine's share certificate was lost or destroyed, any loss or destruction and ensuing events occurred due to the negligence of Colbent or its employees. (Filing No. 24, ¶¶ 13-15; Filing No. 30, ¶¶ 13-15.) EquiServe, Williams, and Resources Acquisition allege that EquiServe's agreement with Colbent provides that Colbent is liable for loss or damages caused by any negligence or willful misconduct of Colbent or its employees, and, therefore, if EquiServe, Williams, and/or Resources Acquisition are liable to Rodine for any judgment, then Colbent is liable to EquiServe, Williams and/or Resources Acquisition. (Filing No. 24, ¶¶ 16-17; Filing No. 30, ¶¶ 16-17.)

The Affidavits and Deposition Testimony

Carmine C. Chirichiello, President of Colbent, states that Colbent is a Massachusetts corporation with its principal place of business in Massachusetts, and that it has never been authorized to transact business in the state of Nebraska, nor has it transacted any business whatsoever in the state of Nebraska. (Filing No. 48, Ex. A (Chirichiello Decl.), ¶ 1-15.) Chirichiello specifically denies that Colbent ever generated or transmitted the June 29, 2001, letter to Rodine. ( Id., ¶ 17.) Chirichiello stated that Colbent's only contacts with the state of Nebraska are when Nebraska residents holding shares in publically traded companies tendered shares through Colbent in connection with Colbent's outsourcing services in Massachusetts. ( Id., ¶ 5.) Chirichiello does acknowledge that Colbent has a national internet Web site for the purpose of advertising its services. (Filing No. 60, Attachment 3 (Chirichiello Depo.), 10:16 to 12:3.) Although the Web site has e-mail links, there is no indication that products or services can be ordered from Colbent directly through its Web site. ( Id.; Filing No. 60, Attachment 2 (Aff. of Heidi L. Evatt).

In Chirichiello's deposition testimony, he confirmed that Colbent received Rodine's Letter of Transmittal on June 11, 2001, at 11:00 a.m. (Chirichiello Depo., 15:6-23.) Based on the notations made on the Letter of Transmittal, and Chirichiello's own investigation, he concluded that when Rodine's Letter of Transmittal was received by Colbent, the stock certificate was not enclosed. ( Id., 15:6-18:16.) Chirichiello's investigation did not include any inspection of Colbent's storage facilities to see if Rodine's stock certificate had in fact been received and cancelled, but not accounted for by Colbent. ( Id., 59:3-60:7.) Although Chirichiello presumes that Colbent staff would have notified EquiServe of the "deficiency," i.e., the absence of the stock certificate, he does not know who gave such notice or to whom it was given. ( Id., 18:18-19:13.) Chirichiello denies that Colbent prepared or mailed the letter to Rodine which informed her that her Letter of Transmittal and/or stock certificate were not timely received. Chirichiello does acknowledge that Colbent had access to and routinely used EquiServe stationery, as well as EquiServe computer databases, to perform its contractual obligations, and that Colbent did initiate mailings directly to shareholders in connection with some of its EquiServe contracts when it agreed to provide services with respect to "defects." ( Id., 22:1 to 28:14.) Chirichiello denies that Colbent had access to or used the particular kind of EquiServe stationery on which the June 29, 2001, letter to Rodine was sent. ( Id., 62:3-8.)

Keith Menslage, an EquiServe account executive with personal knowledge of the Williams tender offer, stated that EquiServe has no record of sending the June 29, 2001, letter to Rodine, and that the letter does not conform to the format used by EquiServe when corresponding with shareholders on such matters. (Filing No. 60 (Menslage Aff.), Attachment 1, ¶¶ 1, 7-9.)

Standard of Review Colbent has moved to dismiss the Third Party Complaints under Federal Rule of Civil Procedure 12(b)(2) for lack of personal jurisdiction. To defeat a motion to dismiss for lack of personal jurisdiction, the nonmoving party need only make a prima facie showing of jurisdiction. Jurisdiction need not be proved by a preponderance of the evidence until trial or until the court holds an evidentiary hearing. Digi-tel Holdings, Inc. v. Proteq Telecom. (PTE), Ltd., 89 F.3d 519, 522 (8th Cir. 1996); Dakota Indus., Inc. v. Dakota Sportswear, Inc., 946 F.2d 1384, 1387 (8th Cir. 1991).

This Court may assume jurisdiction over Colbent to the extent permitted by Nebraska's long-arm statute and by the Due Process Clause. Oriental Trading Co. v. Firetti , 236 F.3d 938, 943 (8th Cir. 2001); Minnesota Mining Mfg. Co. v. Nippon Carbide Indus. Co., 63 F.3d 694, 696-97 (8th Cir. 1995). Because Nebraska's long-arm statute, Neb. Rev. Stat § 25-536 (Reissue 1995), grants jurisdiction to the fullest extent permitted by the federal Due Process Clause, the Court need only focus on the due process inquiry. Wagner v. Unicord Corp., 526 N.W.2d 74, 77 (Neb. 1995); Crystal Clear Optical, Inc. v. Silver , 531 N.W.2d 535, 539 (Neb. 1995). The Due Process Clause requires that a defendant have sufficient contact with the forum so as not to offend "`traditional notions of fair play and substantial justice.'" Int'l Shoe Co. v. Washington , 326 U.S. 310, 316 (1945) (quoting Milliken v. Meyer , 311 U.S. 457, 463 (1940)). A nonresident defendant's conduct and connection with the forum state must be such that the defendant "should reasonably anticipate being haled into court there." World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 297 (1980). Moreover, it is essential that "`there be some act by which the defendant purposefully avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.'" Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475 (1985) (quoting Hanson v. Denckla, 357 U.S. 235, 253 (1958)). "Purposeful availment" means that the defendant's contacts with the forum state must not be "random," "fortuitous," "attenuated," or the result of unilateral activity of a third person or another party. Id.

The Supreme Court has noted that states exercise two broad types of personal jurisdiction: specific jurisdiction and general jurisdiction. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 nn. 8-9 (1984). A prima facie case of specific personal jurisdiction can only be established if a defendant has purposefully directed its activities at residents of the forum state, and the claim "arises out of" or "relates to" those activities. Id. at 414. Only "minimum contacts" between the defendant and the forum state need be shown for specific personal jurisdiction to be exercised. Lakin v. Prudential Sec., Inc., 348 F.3d 704, 711 (8th Cir. 2003). General jurisdiction refers to the power of a state to adjudicate any cause of action involving a particular defendant, regardless of where the cause of action arose. Helicopteros, 466 U.S. at 414 n. 9; Sondergard v. Miles, Inc., 985 F.2d 1389, 1392 (8th Cir. 1993). A prima facie case of general personal jurisdiction requires a showing of "substantial and continuous" contacts between the defendant and the forum state. Lakin, 348 F.3d at 711. Five factors used to determine whether a defendant's contacts with the forum state are sufficient to support an exercise of general personal jurisdiction, consistent with due process are: "(1) the nature and quality of contacts with the forum state; (2) the quantity of such contacts; (3) the relation of the cause of action to the contacts; (4) the interest of the forum state in providing a forum for its residents; and (5) convenience of the parties." Burlington Indus., Inc. v. Maples Indus., Inc., 97 F.3d 1100, 1102 (8th Cir. 1996). The fourth and fifth factors are of secondary importance and are not determinative. Lakin, 348 F.3d at 711-12; Land-O-Nod Co. v. Bassett Furniture Indus., Inc., 708 F.2d 1338, 1340 (8th Cir. 1983).

Analysis

Viewing the alleged facts in the light most favorable to the Third Party Plaintiffs, the Court infers the following for purposes of Colbent's Motion to Dismiss: 1) Colbent received Rodine's Letter of Transmittal and stock certificate in Massachusetts on June 11, 2001; 2) Colbent either lost or destroyed Rodine's stock certificate; 3) Colbent sent the June 29, 2001, letter to Rodine on EquiServe stationery, falsely notifying her that her Letter of Transmittal and/or stock certificate were received after the tender offer expiration date; and 4) at all times relevant to this action, Colbent maintained an informational internet Web site advertising its services, with an e-mail connection, but not interactive features which would facilitate the execution of contracts. Accepting these inferences as true for purposes of Colbent's Motion to Dismiss, the Court still must conclude that the Third Party Plaintiffs have not made a prima facie showing that this Court has either specific or general personal jurisdiction over Colbent.

The Third Party Plaintiffs' strongest argument is based on the assumption that the letter of June 29, 2001, was sent to Rodine by Colbent. While that letter may have falsely notified Rodine that her tender offer submissions were untimely, her causes of action are based on the alleged loss or destruction of her stock certificate and alleged mishandling of her tender offer materials in the state of Massachusetts. Rodine's cause of action did not "arise out of" the letter of June 29, 2001. The fact that Rodine's stock certificate was not returned to her, with the letter of June 29, 2001, or otherwise, may well "relate to" her causes of action. This Court, however, will not find specific personal jurisdiction over Colbent based on an alleged omission, e.g., Colbent's failure to return Rodine's stock certificate to her. It is noted that the Eighth Circuit Court has declined to find specific personal jurisdiction in cases where a defendant's contacts with the forum state were more extensive than those alleged here. For example, in Digi-Tel, 89 F.3d at 525, the defendant sent numerous letters and faxes and several sample products to the forum state and agreed to be bound by its law in a choice-of-law contractual provision, all related to the subject action. Another example is Aylward v. Fleet Bank, 122 F.3d 616, 619 (8th Cir. 1997), where the defendant made three phone calls and sent one letter into the forum state, all related to the subject of the plaintiff's complaint, although not causal. The Eighth Circuit declined to exercise specific personal jurisdiction in Digi-Tel and Aylward, and this Court similarly declines to do so in this case.

Colbent's Web site warrants only brief mention as a purported basis for general personal jurisdiction. In Lakin, 348 F.3d at 711, the Eighth Circuit Court used its five-factor analysis — placing emphasis on the quantity, nature and quality of contacts, as well as on the connection between the cause of action and the contacts — to address the issue of whether a defendant's "sophisticated, interactive Web site" provided a basis for the exercise of general personal jurisdiction. The court noted that even repeated contacts with forum residents by a foreign defendant may not constitute the requisite substantial, continuous and systematic contacts required for a finding of general jurisdiction. Id. at 348. In Lakin, the matter was remanded to permit the plaintiffs to conduct further jurisdictional discovery, which had been denied by the district court. In the case at hand, discovery has been pursued, there has been no motion for further jurisdictional discovery, and the Web site is informational and not "sophisticated and interactive," as was the Web site described in Lakin. This Court does not find a basis for the exercise of general personal jurisdiction over Colbent.

Finally, while it is recognized that Colbent's contract with EquiServe (Filing No. 24, Exhibit B, and Filing No 30, Exhibit B) provides that Colbent will be liable for errors "caused by its negligence, or willful misconduct or that of its employees," this Court finds nothing in the contract from which it can be inferred that Colbent submitted to the jurisdiction of this Court.

IT IS ORDERED:

1. The Third Party Defendant's Motion to Dismiss Third Party Complaints (Filing No. 46) is granted;

2. The Third Party Complaint of EquiServe Trust Company (Filing No. 24) is dismissed; and

3. The Third Party Complaint of The Williams Companies, Inc., and Resources Acquisition Corp. (Filing No. 30) is dismissed.